It may have seemed unthinkable four years ago, but crypto tokens might be coming to R3's Corda.

Revealed exclusively to CoinDesk, Cordite, an open-source community that's independent from R3, but building solely on the code it pioneered, is about to come out of stealth mode. Cordite promises to do for enterprise blockchains what the ERC-20 standard did for ethereum: allow the creation of different tokens representing various kinds of assets on the same network.

The difference is that Cordite is designed specifically for use by the banking industry. Indeed, the main contributor and community leader of the project is one of the world's 30 largest financial institutions, the Royal Bank of Scotland (RBS).

So whereas ERC-20s unleashed the initial coin offering (ICO) boom, enabling startups across the globe to bypass the usual fundraising hurdles and raise billions from the public by creating exotic new tokens, Cordite will allow digital representation of mryiad assets traditionally held and traded by highly regulated institutions.

In this way, blockchain networks could become more useful to these large companies, since they could track both sides of a trade – cash for securities, for example, or one type of foreign exchange for another – on the same ledger, rather than having one leg of the transaction occurring off-chain.

Richard Crook, the head of emerging technology at RBS, told CoinDesk:

For example, Crook said, "if I am building an invoice platform for trade finance, when the invoice goes one way, I need a digital asset that you and I agree is worth something coming back."

Nevertheless, there's a certain irony here.

Founded in 2014, R3 was designed to be the regulation-friendly shared-ledger provider, one that drew a contrast to cryptocurrency chains and their "anarchic" approach to governance.

Now, with this new project, it will technically become possible to run an ICO on R3's flagship Corda software, albeit unlikely. Rather, Cordite is being positioned as an answer to a range of challenges facing the developers of distributed ledger technology (DLT) inside banks and corporate entities.

The arrival of enterprise tokens on Corda comes at a stressful time for R3, which has been the subject of varying degrees of speculation of late regarding its financial health.

But whatever the truth may be about the privately held firm's cash position, the emergence of initiatives like Cordite suggests that there's a vibrant open-source community growing around the technology R3 developed. According to R3, Cordite is just one of many "CorDapps" about to be released.

"Cordite is not something that R3 invented, it's something that the community itself saw a need for and went to build," said Richard Gendal Brown, R3's CTO.

He added:

Indeed, Crook at RBS said Cordite was underway before he got involved. He happened upon the project about six months ago and found there the answers to many of the challenges facing firms building enterprise DLT projects.

"I won't name them, but it's the same sort of companies that are members of R3 who are contributing to Cordite," he said, adding that the project remained in private alpha mode for the last six months as everyone involved wanted to get the testing right.

Stepping back, Cordite is also one of several examples of corporate technologists experimenting with fiat cash on distributed ledgers in one form or another. Also, some very large firms are looking at internal tokens as a way to connect their treasuries or move money across the world without doing currency conversions.

Yet, beyond such potential efficiency gains, Crook sees tokenization as key to making the economics of shared ledgers workable.

The RBS banker believes that firstly the token will provide a way of distributing fees among participants in the incipient world of enterprise blockchains.

"In the DLT projects that are going live, some of the participants are providing services, some of them are consuming services," he said. "The people that are providing services need to be paid for providing those services and the people who are using them need to pay them."

That said, broader applications overlap with the traditional banking world, such as potentially a standard way to represent a bank's deposits in the form of digital tokens.

"So if NatWest [a subsidiary of RBS] were to issue a token that said we would promise to pay the bearer – a promissory note – I'm pretty sure that most of our customers and clients would find that very useful; it's analogous to an ATM, a digital cash machine," said Crook.

And of course, introducing an ERC-20 equivalent within Corda would presumably mean you could conduct a token sale.

"Technically you could if you wanted to," said Crook, adding that the way this is done in the public arena is not something he's interested in.

However, a token does have some lapel-grabbing possibilities for capital raising within a bank.

For example, the equity and debt trading desks of banks could start to look at the issuance of debt or equity in the form of digital assets.

"That's not dissimilar to the ICO market, but could bring the ICO market into a very regulated space," noted Crook.

"You now have capabilities to do what you are doing with an ICO – i.e., create digital assets that flow back and forth all over the world with no paperwork and everything else – but you are doing it out of a regulated entity."

One more use case for Cordite tokens that RBS and NatWest are interested in exploring is the concept of what Crook called digital mutuals.

In a recent blog post titled "The Return of the DAO," Crook compared decentralized autonomous organizations to mutuals, member-owned entities whose profits are usually re-invested to help improve the organization. Historical examples include building societies in the U.K. and savings and loans in the U.S., as well as mutual insurance companies.

Cordite, he told CoinDesk, "can bring membership, proposals and voting and can create mutual societies, to use the legal term, on the blockchain."

Digital mutuals, in Crook's conception, may require a new form of legal structure in which ownership, management and control become encapsulated in code, while some aspects of the existing rulebook become redundant (annual shareholder meetings, for example, would be unnecessary).

But they may also map directly on to the existing legal structures — co-operative societies, building societies and credit unions to name a few – and regulatory framework, requiring no legislative changes.

And speaking of regulation, it's notable that Crook and his team at RBS were behind a Corda-based mortgage reporting prototype developed in collaboration with the U.K. Financial Conduct Authority.

Crook hinted that the new bee in his bonnet could get similar regulatory support, saying:

RBS branch image via Shutterstock.